In short: If you work remotely while spending time in India, your digital nomad India tax FEMA position is more complex than you might expect. Under the Income Tax Act, 2025, the number of days you spend in India — and whether you pay tax anywhere else — directly determines whether India can tax your global income.
Key points
- The Income Tax Act, 2025 now governs residential status under its Section 6 for all tax years beginning on or after 1 April 2026. Earlier tax years continue to be assessed under Section 6 of the Income Tax Act, 1961.
- The two primary tests for residency remain: 182 days or more in India in a tax year, or 60 days or more in the tax year combined with 365 days or more in the preceding four years — though important exceptions apply.
- Indian citizens visiting India whose total income (excluding foreign sources) exceeds ₹15 lakh enjoy an extended threshold of 120 days instead of 60 days before the second test applies.
- Deemed residency is a critical risk: if you are an Indian citizen not liable to tax in any other country and your Indian income exceeds ₹15 lakh, India will treat you as a tax resident regardless of how few days you spend here.
- India does not recognise split residency — you are either a resident or a non-resident for the entire tax year.
- The relaxed residency rule for Indians going abroad applies only to those actually employed outside India, not to job seekers or freelancers.
Which law applies to your situation?
India replaced the Income Tax Act, 1961 with the Income Tax Act, 2025. However, the transition is not immediate for everyone. The new Act applies only to tax years beginning on or after 1 April 2026.
If your dispute, assessment, or reassessment relates to an earlier tax year — say, 2024–25 — the old 1961 Act’s Section 6 still governs your residential status, even if the assessment happens after the new Act came into force. A savings clause ensures this continuity.
For tax years from 2026–27 onward, you need to look at Section 6 of the Income Tax Act, 2025 for every residency question.
How is residential status determined under the new Act?
The two primary day-count tests
You are a resident of India in a tax year if you satisfy either of these conditions under Section 6 of the Income Tax Act, 2025.
| Test | Condition | Who it applies to |
|---|---|---|
| First test | Present in India for 182 days or more during the tax year | All individuals |
| Second test (standard) | Present for 60 days or more in the tax year AND 365 days or more in the preceding 4 years | Most individuals |
| Second test (extended — 120-day rule) | 60-day threshold raised to 120 days, where total income (excluding foreign sources) exceeds ₹15 lakh | Indian citizens or persons of Indian origin visiting India |
| Second test (exemption) | 60-day condition does not apply at all | Indian citizens leaving India for employment or as crew members of Indian ships |
The practical takeaway: if you are an Indian passport holder who visits India for more than 120 days in a year and earns over ₹15 lakh in Indian income, you could become a tax resident even though you spend most of the year abroad.
Why split residency is not an option
Some digital nomads assume they can be a non-resident for part of the year and a resident for another part. India does not allow this. Your residency status applies to the entire tax year — April to March.
This makes precise day-counting essential. Keep a travel diary and retain boarding passes, passport stamps, and hotel records as evidence of your physical presence or absence.
The deemed residency trap for digital nomads
This is the rule that catches most globally mobile Indian citizens off guard. Even if you spend very few days in India, you can still be treated as a tax resident here under the deemed residency provision.
The rule works like this: if you are an Indian citizen, your total Indian income (excluding foreign sources) exceeds ₹15 lakh in the tax year, and you are not liable to pay tax in any other country — by reason of domicile, residence, or any other criteria — India deems you to be a resident.
This provision was deliberately introduced to address “stateless” tax arrangements where Indian citizens structured their affairs to avoid becoming tax residents anywhere in the world. For tax years before 1 April 2026, this rule operated under Section 6(1A) of the 1961 Act. From 2026–27 onward, the equivalent provision in the Income Tax Act, 2025 applies.
The critical question is whether you actually pay tax somewhere else. If you are genuinely tax resident in another country and pay tax there, you are not caught. But if your nomadic lifestyle means you have no tax home anywhere, India steps in.
Freelancers and job seekers: a tightened rule
There is a significant change in the Income Tax Act, 2025 that directly affects freelancers. Previously, the relaxed residency rules for Indians going abroad offered some flexibility to a broader category of persons. Under the new Act, the benefit of the employment-based exception applies only to those who are actually employed outside India.
Job seekers and freelancers who go abroad but are not formally employed do not qualify for this relaxed treatment. If you are a freelancer working for foreign clients while physically in India, you cannot claim the employment exception and must apply the standard day-count tests.
For a broader overview of how Indian law treats individuals in cross-border situations, you can explore related Law for You guides on The Courtroom, which cover topics in plain language for non-lawyers.
What about FEMA obligations?
Tax residency under the Income Tax Act is a separate concept from residential status under the Foreign Exchange Management Act (FEMA). Your FEMA status determines what kinds of bank accounts you can hold, how you can repatriate money, and what investments are permissible.
It is entirely possible to be a non-resident under the Income Tax Act in a given year while simultaneously holding a different status under FEMA, or vice versa. Digital nomads who move in and out of India frequently need to review both their income tax residency and their FEMA classification independently, since the day-count tests and definitions differ.
Because FEMA obligations — including account types, repatriation rules, and reporting requirements — depend on your specific fact pattern, you should consult a qualified advocate or chartered accountant who practises in both income tax and foreign exchange law before making any structural decisions.
Practical steps for remote workers spending time in India
First, count your days carefully before the end of each tax year. If you are approaching the 120-day or 182-day thresholds, consider the implications before booking return travel.
Second, verify whether you are actually liable to tax in another jurisdiction. If you are not, and your Indian income exceeds ₹15 lakh, the deemed residency rule may apply to you regardless of your day count.
Third, keep contemporaneous records — travel logs, visa stamps, lease agreements, and tax returns filed abroad — so you can establish your position if the tax authorities ask questions.
Fourth, review your FEMA obligations separately. The two regimes — income tax and foreign exchange — operate on different definitions and timelines.
Frequently asked questions
I am an Indian citizen working as a freelancer from abroad. Can India tax my foreign income?
It depends on your residential status for the tax year. If you are a non-resident, India taxes only your Indian-sourced income. However, if you are a deemed resident — because you are not liable to tax anywhere else and your Indian income exceeds ₹15 lakh — India can tax your global income. The employment-based exception does not help freelancers, only those actually employed outside India.
Which Income Tax Act applies to me — the 1961 Act or the 2025 Act?
If your tax year began before 1 April 2026, Section 6 of the Income Tax Act, 1961 governs your residential status, even if assessment happens later. For tax years beginning on or after 1 April 2026, Section 6 of the Income Tax Act, 2025 applies. Both Acts carry forward the deemed residency rule for Indian citizens not liable to tax elsewhere.
Is my FEMA residential status the same as my income tax residential status?
No. FEMA and the Income Tax Act use different definitions and tests for residential status. You could be a non-resident under income tax law but have a different classification under FEMA, or the other way around. Digital nomads and NRIs should assess their position under each statute separately, ideally with professional advice, as the consequences — bank account types, repatriation rights, reporting obligations — differ significantly.
Primary sources
- India Code (indiacode.nic.in) — full text of the Income Tax Act, 2025 and the Income Tax Act, 1961
- Income Tax Department of India (incometax.gov.in) — official guidance on residential status and NRI taxation
- Reserve Bank of India (rbi.org.in) — master directions and circulars on FEMA obligations, NRI accounts, and repatriation
- Supreme Court of India (sci.gov.in) — authoritative judgments on tax residency and FEMA interpretation
Written by Editorial Team, The Courtroom · Last verified 2026-07-14
This article is for general information only and is not legal advice. Laws change; verify against the primary sources cited and consult a qualified advocate for your situation.
